Fed Hike Boosts Aussie Dollar Amid IMF Hawkish Warning

The Federal Reserve raised interest rates for the first time in three years to 3.75%-4.0% on Wednesday, as widely expected.

Fed Chair Kevin Warsh said the move was because 'inflation is too high and has been for too long', adding that it was a 'sober' and 'responsible decision'. Warsh signaled the rate could be increased further in a bid to slow rising prices.

The Reserve Bank of Australia (RBA) has held the Official Cash Rate (OCR) at 4.35%, following three consecutive hikes earlier this year. Markets are now pricing in nearly 76% odds that the Australian central bank will raise the Official Cash Rate (OCR) to 4.60% at the next RBA Board meeting.

The International Monetary Fund (IMF) stated that the RBA should stand ready to hike interest rates given inflation risks remain tilted to the upside, adding that the government could also support disinflation by reining in spending.